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Catherine Birch, senior economist at ANZ, notes that the construction activity in Australia fell 3.8% q/q in Q2 2019 to be down 11.1% y/y and was the fourth (and largest) quarterly contraction in a row.

Key Quotes

“The decline in residential construction worsened to -5.1% q/q, dragging the annual result down to -9.6%. Non-residential building saw an even larger fall of 6.6% q/q and engineering construction rounded off the trifecta, down 1.1% q/q.”

“After two quarters of disappointing results, public engineering construction eeked out a 0.9% gain in Q2. However, it remains 16.1% down from the peak a year ago despite the solid pipeline of infrastructure projects. Public non-residential building dropped a further 4.9% q/q, following the 2.9% fall in Q1.”

“New building (-5.3%) and alterations and additions (-3.3%) combined to drag down private residential activity to its lowest level since late 2015. Private engineering construction has not yet bottomed out, falling 2.5% q/q, while private non-residential building lost all of the gains from Q1 and then some, down 7.3% q/q.”

“The sharper-than-expected fall in construction activity during the quarter will undermine GDP growth in Q2 2019 and puts downside risk on our pick.”